Covering

The first battle over covering the expense of excess capacity generated by the onset of competition in the Canadian natural gas delivery grid has been won by TransCanada PipeLines Ltd., but the war is far from over. The National Energy Board (NEB) rejected a salvo of proposals to make TransCanada absorb half the costs of empty space in its system, setting the stage for toll increases on the remaining customers, with the amounts to be determined by another case now developing. However, the board also declared that its decision to uphold the status quo is temporary.

Denver-based Evergreen Resources Inc. on Tuesday was awarded the lease rights on three tracts covering 14,908 acres of prospective coalbed methane (CBM) properties in Alaska’s Matanuska Valley. Evergreen was high bidder on the tracts at the 2001 Northern Cook Inlet Basin oil and gas lease sale in September, held by the Alaska Mental Health Land Office.

Building on modest short-covering related advances achieved Friday, natural gas futures plowed higher yesterday as traders returned to the office to find that meteorologists had not backed away from their forecasts calling for hot temperatures across an extended area of the country over the next 10 days. With that, the September contract took over as the prompt month at Nymex with a neat, 15.9-cent gain to close at $3.353.

Stemming a string of expiration-day losses at six, natural gas futures eked out a slim gain Friday as traders covered shorts ahead of the weekend and in anticipation of hot weather forecast for this week. The August contract went off the board without much fanfare, up 3.9 cents for the session and 21.2 cents for the week, but down 11.9 cents since it became the prompt contract back on June 27. Estimated volume was modest for an expiration day, with just 92,001 contracts changing hands.

More than one trader was more than a bit surprised at the price run-up in most markets Tuesday in two-day deals covering the Fourth of July holiday, which normally is considered one of the lowest demand periods of the year. Only Rockies/San Juan/Pacific Northwest points and a few Northeast citygates softened, in contrast with numbers elsewhere that ranged from flat to about 15 cents higher outside California and gains at California points that exceeded half a dollar.

Analysts covering the attempted takeover of Barrett Resources byRoyal Dutch Shell Group said last week they expect to seeadditional consolidation of U.S. independents with a heavy gasportfolio, especially now that the majors and larger independentsare flush with cash from through-the-roof commodity pricing in thepast year.

Propelled by forecasts calling for a warmer-than-normal summerand following on the heels of Thursday’s technical rebound, naturalgas futures finished the week on a positive note Friday, ascommercial and speculative traders covered shorts ahead of theweekend. After gapping higher at the open, the April contracttraded quietly for much of the session Friday, finishing 10.8 centsstronger at $5.035.

Other analysts covering Barrett also said they expect to seeadditional consolidation of U.S. independents with a heavy gasportfolio, especially now that the majors and larger independentsare flush with cash from through-the-roof commodity pricing in thepast year.

Reliant Energy Services said it signed power purchase agreementswith affiliates of El Paso Energy covering future supplies fromfacilities to be constructed in Florida. Reliant will purchase, viatwo tolling agreements, the rights to utilize and dispatchgenerating capacity totaling 1,100 MW from two new gas-firedsimple-cycle peaking plants (with fuel oil backup). The plants areexpected to be completed in the spring and summer of 2002 in Pascoand Hardee counties.